ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C= 100 + 0.75Y. Assume further that planned investment /g, government spending G, and net exports Xn are independent of the level of real GDP and constant at lg= 60, G= 0, and Xn= 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y= C+lg+ G+ X Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. b. What happens to equilibrium Yif lg changes to 40? What does this outcome reveal about the size of the multiplier? Multiplier =

ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C= 100 + 0.75Y. Assume further that planned investment /g, government spending G, and net exports Xn are independent of the level of real GDP and constant at lg= 60, G= 0, and Xn= 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y= C+lg+ G+ X Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. b. What happens to equilibrium Yif lg changes to 40? What does this outcome reveal about the size of the multiplier? Multiplier =

MACROECONOMICS

14th Edition

ISBN:9781337794985

Author:Baumol

Publisher:Baumol

Chapter9: Demand-side Equilibrium: Unemployment Or Inflation?

Section9.A: The Simple Algebra Of Income Determination And The Multiplier

Problem 5TY

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3. Consider the following information on a 4-sector (“private-public-open”) economy, where Y stands for the GDP and Ca, Ig, and Xn are respectively consumption after tax, autonomous investment and next exports. Ca = 40 + 0.80 (Y-T) Ig = 30 Xn= 10 T=20 G=20 DI-Y-T Use the information above to solve for equilibrium value of GDP (Y), DI, Ca, Sa, and APC, and APS. Show all your calculations. Show the 4-sector equilibrium GDP graphically. What is autonomous consumption, MPC, MPS, and the multipliers for G and T in this economy? If GDP =520, what would be AEa? Will there be unplanned inventory investment or disinvestment? Will GDP increase or decrease? Why? Explain. At GDP=520, what would be planned investment? actual investment?
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C=100+ 0.8Y. Assume further that planned investment lg, government spending G, and net exports Xn are independent of the level of real GDP and constant at /g=60, G= 0, and Xn = 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C+ Ig+G+X Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. $ b. What happens to equilibrium Y if lg changes to 40? $ What does this outcome reveal about the size of the multiplier? Multiplier =
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C= 100 + 0.9 Y. Assume further that planned investment /g, government spending G, and net exports Xn are independent of the level of real GDP and constant at lg= 60, G= 0, and Xn= 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y= C+ lg+ G+ Xn. Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. $ b. What happens to equilibrium Yif lg changes to 40? 2$ What does this outcome reveal about the size of the multiplier? Multiplier =
In an economy, consumers spend 800 million regardless of their level of disposable income. In addition, they spend 75% of their yearly disposable income. * Investment is fixed at 250 million, Gvt expenditures are 120 million, net taxes are 100 million, exports are 170 million. Imports are 15% of the level of disposable income. Q, what is this economies equilibrium level of output Q how much would net export be when this economy is at equilibrium output
n an effort to make sales projections, M/s K, B and A, the three B-school executives of Vengaboys Inc., were discussing about the national income and its growth in Ibiza. K had estimated a linear consumption function for Ibiza to be C = 100 + 0.6 Y, and investment to be I = 100 per ear. In Ibiza, there was no income tax and government spending was minimal (assume 0). Ibiza was a closed economy, and hence no exports and imports. (i)K immediately knew what the investment Multiplier was. Can you find out? (ii)What is the level of income in Ibiza? (iii)K estimated that with Government spending 100 on a new road to be constructed, the income levels are sure to go up. K quickly calculated the change in income and the new income level to be:
Q.30. C = 100 + 0.4 Y is the Consumption Function of an economy where C is Consumption Expenditure and Y is National Income. Investment expenditure föfeign exchange etc. financing, is 1100. Calculate: () Equilibrium level of National Income.
Assume that total expenditure E comprises the sum of government consumption, G, household consumption, C, and investment, I. Assume a closed macroeconomic system, so that income equals expenditure Y=E. If we define household saving, SH, as SH=Y-T-C, where the cunsumption function is a fixed proportion of disposable income, C=c(Y-T), which of the following will be true? a. Higher government spending alongside unchanged taxation will lead to higher investment and higher household saving b. Higher government spending alongside unchanged taxation will have no effect on household saving or investment c. Higher government spending alongside unchanged taxation will lead to higher household saving d. Higher government spending alongside unchanged taxation will lead to lower household saving
ADVANCED ANALYSIS Assume that the consumption schedule for a private open economy is such that consumption C = 50 + 0.9Y. Assume further that planned investment /g. government spending G, and net exports Xn are independent of the level of real GDP and constant at lg= 30, G= 0, and Xn= 10. Recall also that, in equilibrium, the real output produced (Y) is equal to aggregate expenditures: Y = C+ lg+ G+ Xp. Instructions: Round your answers to the nearest whole number. a. Calculate the equilibrium level of income or real GDP for this economy. $ b. What happens to equilibrium Yif lg changes to 10? 2$ What does this outcome reveal about the size of the multiplier? Multiplier =
Given the following consumption function, C = 400 + 0.75YD,where C= consumption expenditure, YD = disposable income, Investment= $1200, Government spending = $1600,Exports = $500, Imports = $600, Taxes = $1200 and Potential GDP = $9000Aactual output is less than potential outputactual output is zeroactual output is equal to potential outputactual output is higher than potential output
Suppose that the level of income is $1000 and the tax rate is 0.1 %. Given this data, what is the level of disposable income? Use the following information to answer questions 5 through 8: Consider the following information for Slovenia. Category Amount Autonomous Consumption 430 MPC 0.9 Tax Rate 0.25 Investment 800 Government Expenditure 100 Exports 20 MPI 0.05 What is the equilibrium level of GDP in the income-expenditure model? Suppose that there is a decrease in Exports by $20. What is the new equilibrium level of GDP in the income-expenditure model? What is the difference between the original and new GDP as a result of a decrease in Exports? Suppose that MPC is equal to 0.8. What is the spending multiplier?
8. The income-expenditure model Consider a small economy that is closed to trade, so its net exports are equal to zero. Suppose that the economy has the following consumption function, where C is consumption, Y is real GDP, I is investment, G is government purchases, and T stands for net taxes: C = 15+0.75 x (Y-T) Suppose G = $90 billion, 1 = $60 billion, and T = $20 billion. Given the consumption function and the fact that for a closed economy total expenditure can be calculated as Y=C+I+G, the equilibrium output level is equal to 5 billion. Suppose the government purchases are increased by $50 billion. The new equilibrium level of output will be equal to Based on the effect of the change in government purchases on equilibrium output, you can tell that this economy's spending multiplier is equal to
refer to the following table: Consumption expenditure (C)= 100+ 0.8 Yd Investment expenditure (1) = 120-500/ Government spending (G)-50 Money demanded for Asset purpose = 100-2000 i Money demanded for transaction purpose- 60+0.1 Y Money demanded for precautionary purpose 40 Where i is the interest rate, Y is the real GDP; Yd is the disposable income Suppose Grises by 100 S because of increased expenditure on education. What is the new equilibrium Y? 4600 2444 1444.44 1131.148 2000 Taxes 0.1 Y Current account 0 Demand deposits 60 Saving deposits 30 Currency in circulation-10 Banks reserves-20